Marginal cost-based pricing of wheeling transactions and independent power producers considering security constraints

Various proposed pricing policies for wheeling transactions and independent power producers under open transmission access do not compensate, in a direct manner, parties who participate in maintaining network security and provide the system reactive power requirements. Within this paper, a pricing structure that provides such compensation, based on physically meaningful price components, is developed. Prices determined by the proposed method reflect the cost of incurred losses and those of satisfying network security constraints. The effects of security constraint specifications on price calculations is investigated. Results are presented for the IEEE 6- and 30-bus test systems. (C) 1998 Elsevier Science S.A. All rights reserved.